A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from
A) the likelihood of collusion.
B) high entry barriers.
C) product differentiation.
D) mutual interdependence in decision making.

Question

Quizplus · Accepted Answer

A monopolistically competitive industry is characterized by product differentiation, which allows firms to have some pricing power and control over their market share. This leads to some degree of monopoly power, but also allows for competition from other firms offering similar but not identical products. The other choices - likelihood of collusion, high entry barriers, and mutual interdependence in decision making - could apply to other types of market structures, but are not necessarily characteristic of monopolistically competitive industries.

A Monopolistically Competitive Industry Combines Elements of Both Competition and Monopoly